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CHRISTIANE AMANPOUR, HOST: The United States examines the accused Fort Hood gunman's ties to a radical cleric in Yemen. Are al Qaeda and its allies trying to stage a resurgence in the U.S., and in Europe? Is this their new frontier?

I'm Christiane Amanpour, and welcome to our program.

The killings at the U.S. military base at Fort Hood, as well as the ongoing debate on Afghanistan, have put al Qaeda back in the headlines and in the minds of counter-terrorists.

We talked to the State Department's ambassador at large for counterterrorism, Daniel Benjamin. It's his first television interview since taking office.

We'll also be talking with al Qaeda experts, Karen Greenberg and Thomas Hegghammer, who've been tracking global jihad for years.

And with the U.S. peace effort in the Middle East stuck in the sand, is there an engine strong enough to pull it out? We'll ask former U.S. diplomat Aaron David Miller and Amira Hass of the Israeli newspaper "Ha'aretz." Her title, correspondent in the occupied land.

In the United States anti-terror officials say that a suspect they arrested in September was planning attacks on the New York mass transit system. It's an eerie reminder of the Madrid train bombings of 2004 that killed nearly 200 people. And the so-called 7/7 suicide bombings on the London transit system which killed more than 50 people.

We focus on al Qaeda. Is it weakening, or does it have a new lease on life? We start with this report from CNN's Nic Robertson in London.

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice-over): They're an angry minority. Their goal, nothing short of Muslim domination of the United Kingdom, if not the world.

UNIDENTIFIED MALE: This poster is basically showing how we will transform Buckingham Palace into a local mosque for the Muslims.

ROBERTSON (on camera): And what happens to the Queen?

UNIDENTIFIED MALE: Well, the Queen, she'll have the choice. She can either become Muslim or she can leave the country.

ROBERTSON (voice-over): This man, Anjem Choudary, is their leader. He demands Islamic law known as Shari'ah to be the law of the land.

ANJEM CHOUDARY, ISLAM4UK: Drugs will be banned. Pornography will be banned. Gambling will be banned.

ROBERTSON: Choudary's strategy is to pit Muslims against everyone else to create tension.

CHOUDARY: We do expect to enter into a struggle, if you like, of words, and maybe even more than that, before we can see the fruition of the Shari'ah on the state level.

UNIDENTIFIED MALE: Muslims are here to say!

CROWD: Muslims are here to say!

ROBERTSON: Like Muslim radicals, Yusef Qutab (ph) and Yunis Abdullah Mohammed in New York, Choudary supports Osama bin Laden and justifies the 9/11 attacks. In fact, Choudary claims he was spreading the message of jihad, or holy war, even before 9/11.

CHOUDARY: I've been to New York a couple of times before 9/11. And even to the bible belt, I think they call it, in the Midwest. And you know it's about propagating Islam. I do believe that the Muslims of America are possibly five or 10 years behind in terms of the struggle that they're engages in.

ROBERTSON (on camera): What Choduary is implying is that how radicalization evolves here in Britain and in Europe will in some part be a model for what the United States can expect. Here, terrorism officials say they're tracking about 30 serious terror plots.

(Voice-over): In the weeks after the London subway terror attacks in 2005, Choudary's co-leader, Omar Bakri, fled the UK, fearing he would be arrested for his radical views. Now he's in Lebanon, broadcasting his message over the Internet.

He describes the 9/11 attackers as the magnificent 19. And in Europe, it appears that message is turning into action. Last year, Belgium police busted a group alleged to be using chat rooms to recruit Muslims for al Qaeda training in Pakistan.

GLEN AUDENAERTM, DIRECTOR, BRUSSELS FEDERAL POLICE: We knew we were in the presence of an organization that is part of al Qaeda. We knew that these people were in contact with the highest levels of al Qaeda in Afghanistan.

ROBERTSON: One of those arrested was this woman, Malika El Aroud. Her Web site praised Osama bin Laden.

ROBERTSON: Now she's in jail, charged with taking part in the activities of an Islamic terrorist group. She denies the charge.

ALAIN WINANTS, DIRECTOR, BELGIUM STATE SECURITY: She is, in fact, one of the leading jihadists person on Internet. Her site on the Internet attracts very much interest from other persons.

ROBERTSON: Now intelligence officials tell CNN, that a French atomic scientist charged last month with associating with terrorists was participating in Malika El Aroud's Web site.

Back in London, Anjem Choudary says that's the point. You can be anywhere to recruit people to radical Islam.

CHOUDARY: So it's very easy nowadays for people to build up links and communication very quickly. And then after that, you know, to disappear and to go off, you know, wherever they want to go.

ROBERTSON: And where they want to go, intelligence services worry, in increasing numbers, is into violent jihad around the world.

Nic Robertson, CNN, London.

(END VIDEOTAPE)

AMANPOUR: So what are we to make of all of this? Joining me now, Daniel Benjamin, the State Department's ambassador at large for counterterrorism. He's in Washington.

And here in our studios, Karen Greenberg, an expert on al Qaeda and an executive director of New York University's Center on Law and Security. And Thomas Hegghammer who's been tracking global jihad for years. He's a senior research fellow at the Norwegian Defense Research Establishment in Oslo.

Welcome to you all. I want to start with you, Ambassador Benjamin, at the State Department. Because of the Fort Hood killings, because of the suspicions that there may be something other than just religious fanaticism involved.

Can you tell me what the United States believes to be the motivation and what you're tracking in that case?

DANIEL BENJAMIN, AMBASSADOR-AT-LARGE, U.S. STATE DEPT.: Well, Christiane, it's a pleasure to be here. And particularly a pleasure to be on with Karen and Thomas who -- for both of whom I have the greatest respect.

As for the Fort Hood case, you know, there is an ongoing investigation. And it is a law enforcement matter. So I really can't comment on anything beyond what has already been put out there.

Major Hasan, the principal -- the only suspect in this case, has been indicted today, I believe, with 13 counts of premeditated murder. And I believe that the various investigating bureaus have said that they have seen these e-mail messages to a radical cleric.

But that they were not of sufficient concern to open up an investigation. And there doesn't appear to be any linkage to any outside groups in terms of the operation itself, in terms of the tragic events at Fort Hood. So that's really all we've got.

AMANPOUR: All right. Well, let me ask you, Thomas Hegghammer, not necessarily an actual instruction from an outside group. But tell me, you're tracking these jihad groups. This apparently was a cleric in Yemen that he was exchanging e-mails with.

Where is the center of concern right now about al Qaeda? We have this map. You can -- you can draw on it, illustrate and let us know.

THOMAS HEGGHAMMER, INSTITUTE FOR ADVANCED STUDY IN PRINCETON: Well, I think it depends on what you mean by al Qaeda.

AMANPOUR: Well, what do you mean by al Qaeda?

HEGGHAMMER: Al Qaeda is three things. First of all, it's an ideological movement of people who share al Qaeda's mission of global jihad against the west. And this movement is everywhere. It's online. It's global. Then it's -- al Qaeda is also a franchise of regional organizations in Iraq, for example, and in Yemen and also in Algeria.

AMANPOUR: North Africa here.

HEGGHAMMER: And then, finally, al Qaeda is also a core, very tightly organized organization in Pakistan. And this group, which we call al Qaeda Central, is constantly trying to mount operations in the west.

AMANPOUR: But here's the thing, Karen. Over the last few years we've heard one thing and then another. First that they were all powerful. Then that they started to split but they were still a big amorphous organization and a network.

Then that actually they were being weakened, the drone attacks were killing off, I don't know, something like 40 of their leaders, spreading the message here. What is the situation now? How is thinking evolving over the last year?

KAREN GREENBERG, EXEC. DIR., CENTER ON LAW AND SECURITY, EDITOR, "AL QAEDA NOW": Well, I think it's -- the question is how is it evolving over the last couple of years. You're right. After 9/11 the United States incursion into Afghanistan did a lot to disrupt training camps and the network itself.

There are -- our policies around the world have pushback against al Qaeda. So there have been a number of factors that, you know, diminished, I think, their activity and their -- their recruitment.

However, the national intelligence estimate has paid attention to this. And in the past couple of years have said, look, they may be quieter, but they're shifting. They're changing.

The question is how are they regrouping? What is happening? And I think that's still where we are. We're trying to see how they're regrouping. And one of the reasons that Fort Hood caused such -- got such attention was that it was maybe the tenth alleged al Qaeda maybe related activity or arrest in the past in September of this year.

And so the question is for this country and elsewhere in Europe where England has had a number of incidents that they've stopped recently, what is happening? Or is there a new strategy that is smaller targets, smaller activities that may coalesce at some point?

AMANPOUR: Well, Daniel, let me ask you. First of all, I want to know, do you think that there is an al Qaeda front in the United States?

BENJAMIN: I'm not sure I'd use the word "front." We do know that al Qaeda senior leadership in Pakistan, in the tribal areas, has consistently sought to create conspiracies and to plot against western targets including the United States.

That has been a constant in their activity for a very long time. Certainly from before 9/11, and I don't see any reason why we should think that has changed. That is really a constitute element of what the group is all about?

AMANPOUR: So is Afghanistan al Qaeda free? Should the world worry about Afghanistan becoming yet another place for al Qaeda to regroup and recruit?

HEGGHAMMER: Definitely. One of the reasons why al Qaeda became so strong and why it was able to carry out 9/11 and so on is it had big training camps in Afghanistan. So that is definitely something to worry about. And right now the majority of the core al Qaeda leadership is based in Pakistan by ratio of some three to one.

AMANPOUR: We're going to be right back with all three of you. Stay with us. We want to know, and we're going to ask whether, in fact, the U.S. and Europe know their enemy. Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Your democratically elected government continues to perpetuate atrocities against my people all over the world. And your support of them makes you directly responsible just as I am directly responsible for protecting and avenging my Muslim brothers and sisters. Well, until we feel security, you will be our targets.

(END VIDEO CLIP)

AMANPOUR: So that was Mohammed Sidique Kahn, the ring leader of the London suicide bombers. And we bring it up because it goes to the heart of matters. So many questions about why often it's middle classed, educated, people who've even had some secular education who commit these crimes.

So joining me again, Daniel Benjamin at the State Department, Karen Greenberg at New York University, and Thomas Hegghammer, who's been tracking the global jihad movement.

I guess the question I want to post to you, Daniel Benjamin, is do you even after all these years understand the complications in so much of this modern Islam? For instance, the kind of grievances that somebody who is educated, like Mohammed Sidique Kahn took upon himself to the point of becoming a jihadist?

BENJAMIN: Well, it would be foolhardy to claim to know everything about this movement. But I don't think we should be surprised that it's the educated who are often leading this effort. I mean revolution has historically been -- revolutionary movements have historically been the domain of the educated and intelligencia. They've often looked to poorer individuals to be their foot soldiers. But this is entirely consistent with revolutionary movements for several centuries. And.

AMANPOUR: Except that Sidique Kahn was a foot soldier. He's dead. He was a suicide bomber.

BENJAMIN: Yes. But he was the leader of his own cell. And, you know, Mohamed Atta also was a very educated person. He had, I believe, a master's in urban planning. In fact, almost all of the senior leadership and the major activists in this group have had western style educations.

And they've developed critical faculties. And they are very much the ones who are most likely to feel acutely what they perceive as kind of grand humiliation, civilizational humiliation. And that's what motivates them.

AMANPOUR: Is there, Karen, therefore, a way, I don't know, to have a campaign of hearts and minds? Somehow there's this local, personal humiliation feeling that they then combine with this global jihad. Is there a way to crack that?

GREENBERG: Good question. Let me just expand a little bit on what Dan was saying. It's complicated. Yes, maybe the leaders are the more educated. But currently in a lot of the arrests here and elsewhere it hasn't just been the educators. And they're not just -- you know, the educated. And they're not just foot soldiers.

So we're seeing it sort of move to people who are on the fringes, et cetera. So this question of humiliation may come in economically as well - - socio-economically as well as elsewhere. And I think it's an important trend to look for.

AMANPOUR: This whole notion about drones and drone attacks, there have been obviously many complaints on the ground that drone attacks are radicalizing the population on the ground. Others are saying that actually the benefit is that it's killing a lot of the leadership.

There is a professor at NYU who says -- rather Columbia, who says that, in fact, al Qaeda should not be destroyed. It should be weakened. But don't destroy it because otherwise you won't know where all those people go. They'll seep out into other organizations.

Is that reasonable? Should one keep it weakened and in your sights?

HEGGHAMMER: No. I disagree with that argument. I think that it's true that if you decapitate al Qaeda, then it will spread out in smaller pieces. But I think that ultimately that threat is smaller than the one where you have a structured organization. History shows that organization increases the efficiency of terrorist attacks.

AMANPOUR: So final question to all of you. Daniel Benjamin, is al Qaeda stronger and more effective right now or not?

BENJAMIN: Well.

AMANPOUR: Than a year or two ago?

BENJAMIN: A year or two ago, no, I don't think so. I think the senior leadership is under considerable pressure, but at the same time I think we see a number of places around the world where it has worrisome strength. Yemen is one place. Somalia, east Africa, is another.

You know it's constantly a changing picture. And as the other participants have said, it's complicated. I think we are doing better, but we're certainly not out of the woods on this.

AMANPOUR: Thomas, is al Qaeda stronger, more effective?

HEGGHAMMER: I think it's about as effective as it was one or two years ago. But it's really clear that it's weaker than it was five or six years ago. And that has to do with the massive counterterrorism effort that's been mounted against them.

AMANPOUR: As I ask you the same question, also to note that if you go to Afghanistan or Pakistan, for instance, the level of support for extremism is, in fact, dropping. Do you think that al Qaeda is stronger or weaker?

GREENBERG: It's stronger in the western headlines these days. It's weaker in its ability to carry out attacks. We're thwarting it again and again. It's a presence that isn't going to go away the way we want it. And we just have to keep ever vigilant.

AMANPOUR: Karen Greenberg, Thomas Hegghammer, and Daniel Benjamin at the State Department, thank you so much, all of you, for joining us.

And next, we'll tell you who's fighting to take Islam back. And you might be surprised.

(COMMERCIAL BREAK)

AMANPOUR: Despite all the talk about Islamic extremism, there are many in the Muslim world who are stepping up the struggle for moderation. And one of them is Dr. Naif Al-Mutawa from Kuwait. He's created super heroes called The 99. He says they're the militant busters and they take their inspiration from the Koran.

They include Jabbar the powerful, who you can see has super human strength, and Noora the light who can see the light of truth in others. She's joined by Bethina the hidden. Another female super hero who covers up under the veil. Their mission is to attract children and to teach them a tolerant and peaceful face of Islam.

And you can find out much more about the super heroes by going to our Web site, CNN.com/amanpour where you can download a free copy and find out why they're called The 99.

Next, do political leaders have the super human courage to end the struggle between Palestinians and Israelis? That's when we come back.

(COMMERCIAL BREAK)

BROOKE BALDWIN, CNN CORRESPONDENT: Hi there. I'm Brooke Baldwin. Here's a quick check at some of our stories. First, President Obama now arriving in Shanghai for his first ever visit to China. There he is in the pouring rain. Air Force One touching down there.

Mr. Obama is set to meet with local leaders in Shanghai before heading on to Beijing for a two-day state visit hosted by the Chinese president.

And administration officials tell CNN a prison in rural Illinois is now the leading contender here to house some of the detainees from Guantanamo Bay. Federal officials are scheduled to inspect this nearly vacant prison. It's in the village of Thomson. That will happen tomorrow.

And the state's governor, Pat Quinn, wants the federal government to buy this facility. Why? Saying the deal would bring much needed jobs to his state.

(BEGIN VIDEO CLIP)

GOV. PAT QUINN (D), ILLINOIS: This is the -- an opportunity of a lifetime. The people of Illinois to take a facility that's been constructed with taxpayer dollars, and the people of Illinois -- and to have a transaction with the federal government, with the Federal Bureau of Prisons to allow the federal government to use it for public purposes and protection of the people in our state and our country.

(END VIDEO CLIP)

BALDWIN: And those are some of the headlines. We'll see you at 4:00. But now more AMANPOUR. right after this.

(COMMERCIAL BREAK)

AMANPOUR: Welcome back. The Palestinian leader, Mahmoud Abbas, is threatening to quit. The peace process is deadlocked and the U.S. can't get negotiations started yet. Amid continuing controversy over Israeli settlements, the Israeli prime minister made a last-minute visit to the White House without so much of a photo op with President Obama. Things in the Middle East are about as bad as they've ever been, at least politically. But it wasn't meant to be this way, not when President Obama first came into office promising to make this his priority. Is the peace train about to come totally off the tracks?

I got an interesting, unusual perspective from Aaron David Miller, a long-time American diplomat who's now with the Woodrow Wilson Center in Washington. He's served six U.S. secretaries of state over the last decade, helping to formulate American policy on this conflict. I also talked with Israeli journalist Amira Hass, who writes for the leading Israeli newspaper "Ha'aretz," her title, correspondent in the occupied lands.

(BEGIN VIDEOTAPE)

So much promise. And now, 10 months later, it just seems to be literally going nowhere again. The peace train is stuck in the station.

AMANPOUR: But Barack Obama has been nominated and will achieve the Nobel Peace Prize. And when he came to office, his first major declaration was, This is going to change under my administration.

MILLER: No question. He came on faster, harder and louder with respect to his rhetoric than any previous president on the Israeli/Palestinian issue. And yet he's confronting fundamentally difficult problems, both structural, substantive and with respect to the two men on which so much of this depends on.

AMANPOUR: You know, I was going to ask you about the two men. I want to ask Amira, though, who spends her time literally immersed in this conflict, what motivates you, essentially, to leave your tribe and go to the other side and try to tell the story? Why?

AMIRA HASS, JOURNALIST, "HA'ARETZ": I'm a journalist. If I were a journalist in France, I would have been in Paris. So as a journalist who covers Israeli occupation, I'm in the heart of occupation. We're all concerned with -- as Israeli citizens -- with the future of our state because we see that a state which is built only on military superiority cannot last forever. We need other paradigm and other parameters in order to live in a region which is all Arab, Muslim and non-whites (INAUDIBLE)

AMANPOUR: I'm going to ask you again, what about the two people or the two leaders involved here? Is it a question of not having the courage to actually take the difficult choices?

MILLER: I think it's that and the reality that these two men, Benjamin Netanyahu and Mahmoud Abbas, are prisoners rather than masters of their political constituents. And I may be too much a student of history of prisoners in the past, but when there are breakthroughs -- Sadat, Begin, Arafat, Rabin, Hussein -- it is when leaders find a way to master their political constituents, create some measure of hope and vision and incorporate at least part of the narrative of the other side into theirs.

Right now, we don't have that. We have zero sum game politics. My gain is your loss, and vice versa. And there's no way you can move based on that kind of approach.

AMANPOUR: I'm going to play something Saeb Erekat, the chief Palestinian negotiator, told this program a week ago about the current deadlock and about the viability of what you've all been working for, and what you just mentioned, the idea of having two states.

(BEGIN VIDEO CLIP)

SAEB EREKAT, PALESTINIAN NEGOTIATOR: I think President Abbas must ask himself that question. If the Israeli government insists on continuing with settlement activities and dictation and fait accompli policies, is there two states possible anywhere? Because the land that I supposed to have my state on -- the West Bank, Gaza and East Jerusalem -- is being eaten up by settlements and walls. And maybe -- maybe it's time to -- Mr. Netanyahu, he made the choice -- he had the choice between peace and settlements and he chose settlements. And Abu Mazen must make the choice.

AMANPOUR: Between?

EREKAT: Between continuing, following, you know, the -- his dream and our dream and ambition to achieve a state, and the fact on the ground that Israel is undermining the two-state solution and maybe we should go to see other options. Maybe the one-state solution is the option now.

(END VIDEOTAPE)

AMANPOUR: What would that mean for Israel, one-state solution?

HASS: It is already the one-state solution. It is the one state now. It's Israel. It's one Israeli government which decides about the future and the wellbeing of two peoples who live in the same territory between the river and the sea, but they don't have the same rights. They are confined to two different sets of laws, of infrastructures of judicial system, of education system. So a form of apartheid, the word that nobody likes to hear. But this is very -- in that sense, it is similar because there are two peoples in one territory and not with the same rights.

I live in Ramallah. People in Ramallah do not have the right to go and not only to settle in Tel Aviv but also to travel to Tel Aviv. But every Israeli in Tel Aviv has the right to move on that very spot, to the settlements near Ramallah, and get -- and be a full Israeli citizen. Aaron has a full right to go. Aaron has more rights -- as a Jew, he has more rights in Israel and Palestine than any Palestinian who lives in Palestine and in Israel and abroad.

MILLER: Amira's observation's an interesting one, and the conditions she's described are not only unfortunate but tragic. But they're a pathology based on an objective set of circumstances. So I'm not yet prepared to assume -- one-state solution is not a solution, it's an outcome. It's a historic outcome if, in fact, Israelis and Palestinians may not be able to reach through diplomacy separation through negotiations. But that's the question. And I would argue, despite the despair and the cynicism, that's what we ought to be focused on. Is a two-state solution possible?

HASS: But it's possible. It is possible if we -- if we put all the cards on the table and say, It is impossible without the settlements, but all the settlements, half a million Israelis who live in settlements, including East Jerusalem, it -- two-state solution is possible if Gaza goes back to the -- to this formula, not being thrown out as it has.

AMANPOUR: But the settlements right now seem to be what's caused it to collide to a halt, to crash to a halt again. The administration of Barack Obama said, Total freeze, or else there are no talks.

MILLER: Right. And I would argue that...

AMANPOUR: Right or wrong? Was that the right thing to say?

MILLER: Comprehensive settlement freeze, including natural growth -- unattainable. No Israeli prime minister would ever willingly have agreed to that. I think the administration got off on a very wrong foot on the issue of settlements.

Settlements are a huge problem. They prejudice and predetermine the outcome of negotiations. They humiliate Palestinians. But you solve the core issue, you solve the territorial border issue, and the settlement problem will be manageable and may ultimately disappear.

The key issue now, the key question is, can Israelis and Palestinians reach an agreement on the four core issues that drive their conflict -- borders, security, Jerusalem, and refugees. That needs to be the focus. If not, we got to find this out because 10 years after Israeli/Palestinian negotiations began, we still don't know.

HASS: I think it's much, in a way, simpler than that. It's simpler and more complicated. Do Israelis want to be an episode in -- a historical episode, or do they want to continue, do we want to continue and live in that region? This is the...

AMANPOUR: You've also said that being in the heart of the Palestinians, you see their politics as that of a liberation movement still, rather than...

HASS: It should be. No, it should be.

AMANPOUR: ... as diplomatic.

HASS: It should be. Their big mistake is that they chose the road, or they pretended to be a state. This was a mistake of Arafat from the beginning, that he preferred to present himself as a leader of a state, somebody who heads a state, and forgot that he is the head of -- or should be the head of a liberation movement.

Liberation movement also had its moral constraints and...

AMANPOUR: Yes, but many people...

HASS: ... diplomatic constraints, but the thinking that he -- this is a government helped the world or assisted in what I see as an Israeli even plan to portray this conflict as symmetrical, between two independent entities, the Palestinian so-called state, which does not exist, and the Israeli state.

AMANPOUR: But many people...

MILLER: I'm not -- asymmetry of power is correct. Israelis wield the power of the strong. It's the capacity to impose settlements, bypass roads, collective punishment, targeted killings. But the Palestinians wield another power, which I would call the power of the weak. And the power of the weak allows you to basically say the following, I'm under occupation. I have my rights taken away. Therefore, I can use any means at my disposal, including acquiescence in terror and violence, in order to accomplish my objective.

AMANPOUR: We're going to pick up right there right after a break. We're going to ask Amira what she sees from young Palestinians in Ramallah or Gaza.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

HASS (through subtitles): In May 2000, on the Day of the Nakbah, a Palestinian crowd protests against the Israeli occupation. At first it seems more like a soccer game than a violent struggle, but before long, the game's rules change and it turns into a clash with live ammunition. This is the first sign of the severe Intifadah, the uprising that will break out a few months later.

This is very common. It happens once every few months. I don't always know about it. Sometimes I hear it and then come down.

Now that I'm here with them, they don't seem bloodthirsty, like they do when I'm on the Palestinian side.

UNIDENTIFIED FEMALE (through subtitles): The Israeli soldiers?

HASS: Yes. You don't see them as being scary. They just want it to be over.

(END VIDEO CLIP)

AMANPOUR: So that was Amira Hass in a documentary about her work. Amira Hass and Aaron David Miller join me again. We showed that, Amira, because of the human interaction. And there's very little of that when you -- everybody talks about the policy, the politics all the time, the intractable nature of this. What do you find when you are so-called behind the lines and you talk to the people, their hopes?

HASS: Hopes are very...

AMANPOUR: Do they have hope?

HASS: ... very difficult to find now. the hopes are confined much more now to every family, so they would look for ways to send the children to study abroad or to expend their knowledge inside. This hardly exists in Gaza, which is a huge prison, as you know, and people cannot depend on anything which is available all over the world and not things that available in Gaza because of these conditions.

AMANPOUR: See, when I was there and we did this documentary over the summer, I talked to a lot of university-age young people, and sort of high school, middle school age, and I was stunned by, despite the conditions, what they actually did want and see for their future, the fact that, yes, hope is at a -- is a very, very difficult commodity right now. But they do want to be connected to the world, to get out of what you call this prison of their own, you know, government there and also of the Israeli war.

(CROSSTALK)

AMANPOUR: Right.

HASS: It's the Israeli prison, I mean...

(CROSSTALK)

AMANPOUR: You don't think Hamas has anything to say in...

HASS: There is a problem. Israel wrote a script of imprisonment. And both Fatah and Hamas went along this script and their stupid policies, let me say, and their competition with each other. But the script has been written by Israel.

My point is that this -- first there's huge Israeli success in that matter, and that since the early '90s, when there was talk all over the world about a two-state solution and its feasibility after the collapse of the Soviet Union, et cetera, Israel lost a golden opportunity.

AMANPOUR: Aaron, you were involved in many of the peace negotiations and the years that Amira's talking about. Deliberate loss of a golden opportunity by Israel?

MILLER: Deliberate loss -- look, Amira and I are going to have to disagree on this. The Arab-Israeli conflict is not a morality play which pits the forces of goodness on one hand against the forces of darkness on the other. It's complicated. Each side has competing needs and requirements. They've got to be addressed.

Michael Jackson, who's not a preeminent philosopher, wrote a song called "Man in the Mirror." And you know what he said? You want to make a change in your life, the place to start is by looking in the mirror.

Israelis and Palestinians both have to look in the mirror. They haven't sufficiently. Palestinians have a divided national movement, which in 50 years has not managed to come up...

HASS: (INAUDIBLE) don't disagree

MILLER: ... come up with a coherent strategy. Is it armed struggle? Is it diplomacy? And the Israelis have not yet made a decision on what price they're prepared to pay on Jerusalem. Do they want it all or part. On borders, do they want it all or part? On refugees, are they prepared to acknowledge some historic responsibility while not turning the state of Israel into the recipient of millions of Palestinian refugees? And on security.

This conflict is resolvable. It requires bold leadership, and I would argue, despite poor performance to date, a credible American mediator who's prepared to be smart, tough, and above all -- and I know Amira will appreciate this -- fair.

AMANPOUR: I want to ask you something. There is -- I heard a speech by a former U.S. president who basically says that to get over these intractable issues, whether it's genocide in Rwanda or the decades-long Israeli/Palestinian conflict, they have to get over it. Literally. Leaders have to change their mindset. Do you think it's possible for the Palestinians who you cover?

HASS: It's the Israelis, it's Israeli society that has to give up its privileges...

AMANPOUR: What does that mean?

HASS: ... for the future. Water, land, the enormous benefit that we get for being such a security superpower. We produce security knowledge and expertise that the whole world uses, and this is based on our expertise as occupiers. So all this will -- it will change the life of Israel if we -- if we have a solution to this conflict.

AMANPOUR: So when you say this -- Aaron talked about holding up mirrors and people being able to look accurately at themselves in the mirror. When you report from the other side, you're holding up a mirror. What is the reaction in Israel to you and your reports?

HASS: It varies, you know? There are some would say I'm a traitor and some would say that I'm -- they just -- they dismiss me. And some would say that I'm an anti-something -- Israeli or Zionist or Jewish or self-hating Jew. But many others will say -- will remember the things that I wrote in '93 and became true...

AMANPOUR: Such as?

HASS: ... and my warnings that this is not a peace solution, that it is a way for Israel to impose a surrender arrangement and it won't work, that Palestinians will explode sooner or later, things that the so-called armed struggle only assist Israel, which is completely -- I mean, this ridiculous armed struggle and the deification, even, of the armed struggle assist Israel in always upgrading its military capacities.

AMANPOUR: Talking about the leaders -- in '93, she's obviously talking about Oslo. Here you are -- I don't know what date this is, but this is with one of the architects of Oslo, Abu Mazen, the current president. There seems now to be a headlong rush to yet another crisis. He apparently is not going to seek reelection or to stand. I asked whether this was a bargaining ploy, a sulky moment, and they seem very strong on this now, the Palestinian leadership, that, No, enough already.

MILLER: This is a good man whose intentions, in my judgment, are beyond dispute, caught in a hopelessly complicated situation, a triangle, really. On one hand, he's got Hamas, who has tremendous legitimacy on the streets. On the other, he's got Benjamin...

AMANPOUR: Still? Tremendous legitimacy, Hamas?

MILLER: I think absolutely, despite the fact that they haven't produced economically, that Gaza...

AMANPOUR: Or in any way.

MILLER: ... still legitimacy. In the absence of Mahmoud Abbas's capacity to produce an end to the Israeli occupation, to show that negotiations work, Palestinians will always be angrier at the Israelis than they will their own leadership. I mean, and Amira's the expert here, but it would strike me that one of the keys to Hamas's continued success in Gaza is that philosophical issue, that Palestinians will always resent the occupier more than the dysfunctional leader who governs themselves.

AMANPOUR: And let me ask you because it's obviously front and center, the whole Goldstone report about the war in Gaza, which assigns charges on both sides, but many in Israel have been very angry about it. A lot of pressure for Palestinians not to move forward with it, and now the street sort of rising against Mahmoud Abbas. Was that fair, wise, I mean, trying to engineer the politics of this Goldstone report? Was it wise?

AMANPOUR: In my view, on the part of the administration, if they brought heavy pressure to bear, no. And I understand the logic. Why get off on a distraction? I think the administration -- I think Goldstone -- Palestinians should have allowed Goldstone to play itself out. The administration will ensure that Goldstone never becomes operative.

AMANPOUR: Both of you, thank you very much indeed. Amira Hass, Aaron David Miller, thank you for joining us.

(END VIDEOTAPE)

And to find out more, go to our Web site, CNN.com/amanpour, where we have interactive videos in which young Palestinians tell us about their hopes for the future.

Next, our "P.S." As Middle East leaders stonewall, the people on both sides show that they are able to move past history. A poignant film in a moment.

(COMMERCIAL BREAK)

AMANPOUR: Now for our "Postscript." We have a story from our series of "Global Dispatches." It's about an Israeli and a Palestinian. Both are parents. Both have lost children. It's about what they choose to do.

(BEGIN VIDEO CLIP)

(ON SCREEN: TEL AVIV, ISRAEL, 1996)

UNIDENTIFIED MALE (through subtitles): My wife, Ayelet, called me and said, There was a suicide bombing in Tel Aviv.

UNIDENTIFIED FEMALE (through subtitles): What do you know about the casualties? We're looking for three girls.

UNIDENTIFIED MALE: We have no information.

UNIDENTIFIED FEMALE: One is wounded here, but we haven't heard from the other three.

UNIDENTIFIED MALE: I said, OK, that's Bat-Chen. That's my daughter. Are you sure she is dead? They said yes.

(ON SCREEN: BETHLEHEM, OCCUPIED PALESTINIAN TERRITORIES, 2003)

UNIDENTIFIED MALE (through subtitles): On that day, around 6:30, I was driving with my wife and daughters to the supermarket. We saw three Israeli military Jeeps parked on the side of the road. When we passed by the first Jeep, they opened fire on us. And my 12-year-old daughter, Christine, was killed in the shooting.

(ON SCREEN: BEREAVED FAMILIES FORUM, JERUSALEM)

UNIDENTIFIED MALE (through subtitles): I'm the headmaster for all parts.

UNIDENTIFIED MALE (through subtitles): But there is a teacher that's in charge?

UNIDENTIFIED MALE: Yes, I have assistants. I deal with children all the time.

(ON SCREEN: ONE YEAR AFTER THEIR DAUGHTERS' DEATHS, BOTH TZVIKA AND GEORGE JOIN THE FORUM.)

UNIDENTIFIED MALE (through subtitles): At first, I thought it was a strange idea. But after thinking logically about it, I didn't find any reason why not to meet them and let them know of our suffering.

UNIDENTIFIED MALE (through subtitles): There were many things that touched me. We see that there are Palestinians who suffered a lot, who lost children, and still believe in the peace process and in reconciliation. If we who lost what is most precious can talk to each other and look forward to a better future, then everyone else must do so, too.

(END VIDEO CLIP)

AMANPOUR: Over and over again in reporting from all over the world, I've found that the people are often ahead of their political leaders in the most mundane matters and in the most painful of circumstances, as we just saw. And you can see the whole film on our Web site, CNN.com/amanpour, where you can also submit short films of your own.

And that's our report. Thank you for watching. Good-bye from New York.